Inside The Value Chain

Below: Stanley Berger, CEO, addresses employees at the all-company meeting this past April

Representatives from every part of Arista's value chain acted as moderators at their roundtable meeting.

Arista employees and value chain partners had a unique opportunity to discuss important issues affecting everyone.

STOP AND THINK about what makes you a top-notch mechanical contractor. Is it your great design and installation skills? Or, in reality, is your company's ability to bring complex projects to fruition dependent on the links in your supply chain, ranging from the manufacturer of the products you install to the end user?

Have you ever thought about what could happen if you strengthened your relationships with all the links in that chain?

The results could include streamlined processes, greater customer satisfaction, more repeat business, priority service from vendors, and an improved bottom line.

For Arista Air Conditioning Corp., a mechanical service contractor in Long Island City, NY, transforming a supply chain into a value chain is an integral part of its business philosophy.

"Arista has a strong company culture. We work hard at fostering a feeling of community and family. We want our employees to want to work here for more than just financial compensation," says Stanley Berger, Arista's CEO and president of the Mechanical Contractors Association of America (MCAA).

"The key is to extend this philosophy beyond the walls of your company and apply it to everyone involved in your daily business practices. This means establishing and nurturing partnerships with your key manufacturers, suppliers, subcontractors, consultants, building owners, and general contractors."

"My father built this company based on relationships. Whether it's a customer or a vendor, we treat them with equal respect," says Scott Berger, Arista's president.

Stanley Berger adds, "We don't want to be a company that performs a one-time installation for a customer and walks away. It amazes me when contractors don't fight for the service once they've finished a job."

He stresses that repeat business is just one of the benefits that result from having a value chain versus a supply chain. There's also the pride of a job well-done and the satisfaction of all those involved in the process.

"When you establish long-term relationships your company will be richer, and not just in dollars and cents," he says.

Heightened AwarenessWhile most of Arista's employees were aware of the company's strong relationships with its partners, Scott and Stanley Berger wanted to drive that point home even further at their company's spring meeting.

Instead of a "state-of-the-union" type format, the Bergers decided to have roundtables. For the subject matter, Scott says that he and Stanley were inspired by the value chain presentation at the Mechanical Contractors Association of America's 2005 national conference (see sidebar).

"Because the philosophy was already part of our mindset, it was a natural fit for our meeting," he says.

To further illustrate to their employees how Arista integrates its business practices with its partners, the Bergers invited key personnel to the meeting to represent the following categories: manufacturer/supplier; consultant/professional; subcontractor/engineering; and customer/general contractor. In addition, Arista didn't want the partners to just attend the meeting. Instead, the Bergers asked if they would participate in the roundtables as moderators.

At the meeting, Arista's employees were divided into groups of 10 between 12 tables, which included both field and office personnel. Moderators rotated between tables every 20 minutes, which allowed employees to interact with representatives from each category.

During the 20 minutes, the moderators related their history of working with Arista and what services they offer. They also asked for input from the employees on how to further improve their relationship. In turn, employees had the opportunity to give their perspective and ask questions.

According to Scott Berger, the roundtable meeting was a success for everyone involved. "We all came away from the meeting energized. Our employees gained a better understanding of all the components that make our company successful," he says. "At the same time, sitting down with our employees gave our partners a new perspective on how to better work with our company."

Strong Links in the ChainWhen asked how mechanical contractors can better work with partners to turn their supply chain into a value chain, Arista's subcontractors, manufacturers, consultants, and customers all cite a team approach as critical.

"When we work with Arista, their project is our project," says Louis Alvarez, president of Center Contracting, a sheet metal contractor with whom Arista has partnered for the last 25 years. "We have a common goal: to do the best possible job and have a satisfied customer."

To achieve a seamless operation, Alvarez advises mechanical contractors to work with their subcontractors on preplanning and devising a project strategy. He also emphasizes the need for technical parity.

"Whether it's having updated computer software to open each other's documents, or having the right field and shop equipment, it's important that you're all on the same page technically," he adds. "It will make the project go much more smoothly."

In addition, less obvious partnerships, such as those with insurance companies, can be equally critical for mechanical contractors.

For example, Arista works with Zurich North America on maintaining the company's great safety record and finding ways to help keep premium costs down.

According to Hector Tirado, a senior account executive with Zurich, his company looks for contractors with a dedication to safety. Professionalism and a desire to work together also go far.

"In business, companies tend not to work together. Instead, everyone tries to 'win,' which really helps no one," he says. "In the years we've worked with Arista, we've formed a great relation-ship. For us, the better we know a company and understand its needs, the more comfortable we are in taking risks and going that extra mile for them."

When working with customers such as building owners, it's crucial to establish trust and integrity from the very beginning.

"When our company began working with Stanley Berger nearly 14 years ago, we were immediately impressed with Arista's commitment to customer satisfaction, along with their flexibility and accessibility," says Dave Taylor, vice president-finance operations at Orda Management, which owns and manages a large commercial facility that houses New York City's Port Authority headquarters. "It's these traits that lead to repeat business, as well as increasingly larger projects."

"Developing relationships takes time. With the constant changing business environment that we all face in the HVAC industry, we have to rely on each other to understand new trends as well as new regulations," he says. "We must work together to navigate through this business landscape in order to emerge better positioned in the marketplace. With this winning formula, we're mutually successful."

Researching the Value Chain

Nearly five years ago, the group launched an intensive study that has led to the publication entitled The Value Chain: Adding Value to the Supply Chain.

The study states that, "When all participants in the supply chain strive to provide value to their direct and indirect customers, while removing waste from their processes, that supply chain becomes a value chain." It also stresses that if contractors streamline their work processes, develop strong relationships with suppliers, and take advantage of technology, they can significantly increase their company's profitability.

According to Dennis Langley, MCERF's executive director, the study has its roots in a series of brainstorming meetings involving the foundation's Partnership Enterprise, comprised of contractors, manufacturers, and suppliers.

"We literally shut ourselves up in a room to the focus on those issues most critical to the mechanical contracting industry, and what MCERF could do to support contractors," says Langley.

MCERF first debuted the information at MCAA's Industry Funds meeting last December. It was also featured at a session at MCAA's annual national meeting this past spring.

According to Langley, response from MCAA members has been tremendous. "We've reprinted the information numerous times to meet demand from contractors, and there's an ongoing MCAA manufacturer/supplier joint task force devoted to taking the information from this study out on the road to our members," he says. "The sessions will be designed to help contractors identify the players in their value chain and how to improve it."

"We owe a huge debt of gratitude to MCERF's Partnership Enterprise for being our think tank and helping us identify value as a key issue," says Langley. "We're also grateful to everyone who spent countless hours helping distill a long, academic study into a relevant tool that contractors can truly use to improve their businesses."

For more information on MCERF's value chain research, call Dennis Langley at 800/556-3653 or visit www.mcaa.org/mcerf

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